Sebi to rationalise regulations for FPIs, market intermediaries to improve ease of business

The focus will be on removing regulatory redundancies, simplifying procedural requirements and leveraging technology, said Sebi.

Capital market regulator Sebi has lined up further measures to comprehensively rationalise and optimize existing regulations for FPIs and market intermediaries this year, to improve ease of business and encourage long-term capital flows, the annual report said on August 12.

In the coming year, Sebi is looking to initiate an exercise to rationalize and optimize existing regulations in order to reduce compliance cost for market intermediaries. The focus will be on removing regulatory redundancies, simplifying procedural requirements and leveraging technology, said Sebi.

Sebi said in its annual report that in FY26 that it will also rationalize and simplify regulatory framework for foreign portfolio investors (FPIs) with the objective of enhancing the ease of operations and encouraging long-term foreign capital flows. "Efforts will be made to streamline processes, remove regulatory frictions and strengthen engagement with FPIs and stakeholders," the report said.

The regulator said it will work towards greater dematerialisation of securities, and include in its ambit promoter group, selling shareholders, directors, key managerial persons (KMPs), qualified institutional buyers (QIBs), current employees and shareholders with special rights.

The regulator said it is working towards simplifying the offer document preparation process, by adopting a template-based approach.

The unclaimed funds lying with the trading members (TMs) will go through a detailed procedure, and steps will be taken in case the client is not traceable.

For market intermediaries, a review of regulations to simplify, ease and reduce cost of compliance will be undertaken in FY26, said Sebi, while balancing the need for investor protection. Sebi also said it will review the parameters for designating a stock broker as a qualified stock broker.

Sebi added that a system is being developed for online monitoring of system audit of stock brokers, to protect against unauthorized trades and misuse of trading terminals.

The regulator also said that it is in the process of reviewing the regulatory framework for AMCs, and the guidelines for the valuation of gold or silver held by an ETF.

For low-risk FPIs such as Sovereign Wealth Funds (SWFs) and regulated Public Retail Funds, Sebi is proposing to review if these entities can be permitted to invest under multiple routes under with minimal and single-window KYC requirements. Sebi may also consider to relax ease of business while optimizing regulations, and dilute compliance requirements for existing and prospective FPIs that invest only in government bonds.

The regulator has identified CERT-In empaneled audit of cybersecurity controls on the MIIs, which will be extended to include KYC registration agencies (KRAs), qualified registrar and transfer agents (QRTAs), asset management companies (AMCs) and stock brokers during FY26.

An in-house analytics application called InfoMerge was developed to support the Investigation Department. Sebi said its Phase I has been implemented, and Phase II and III would be rolled out in 2025-26.